With numerous challenges over the past several years for producers, we at Mercer Landmark understand the need for a comprehensive risk management solution. We seek to provide our customers with unparalleled service to ensure maximum results.

Archive for June, 2012

On June 15, the Environmental Protection Agency (EPA) gave final approval to move forward with the sale of E15 ethanol blends. The final issue preventing E15 from moving forward focused on residual fuel left in the hose of single hose pumps that would offer E15 and other fuels.

This announcement knocks down the lone, significant regulatory hurdle standing in the way of getting E15 in the marketplace for passenger vehicles 2001 and newer, according to a statement by the Renewable Fuels Association and Growth Energy. With guidance on that issue from the EPA, fuel providers and retailers wishing to sell E15 can do so provided they register with EPA and follow approved mis-fueling mitigation protocols.

EPA made the decision in response to a request by Growth Energy and 54 ethanol manufacturers. On October 13, 2010, EPA granted the first partial waver for E15 use in 2007 and newer light-duty motor vehicles (cars, light-duty trucks and medium-duty passenger vehicles).

On January 21, 2011, EPA granted the second partial waver for E15 in 2001-2006 light-duty motor vehicles. These decisions were based on test results provided by the U.S. Department of Energy and other test data and information regarding the potential effect of E15 on vehicle emissions.

We are at an interesting point on our calendars. Wednesday will be the longest day of the year in the Northern hemisphere- the summer solstice. This is often a point where weather patterns will change. Looking more in depth at the weather, over the weekend it appears that about a third of the Corn Belt received over 1 inch accumulations with another third between .5 and 1 inch totals but a third got a quarter inch or less. Favored areas were in the west and the south. Over 60 pct of the Corn Belt has had less than 50 pct of normal rains for the last 45 days leaving a good part of the belt still under stress. Friday, also is July option expiration-which may prove to be a tipping point with regards to fund positions and next week, on Friday the 29th, we will see the Quarterly Stocks report and the acreage report. Both of those have the opportunity to shock markets. Two years ago, those reports launched the grain markets into a massive bull run that peaked last year at this time. On the other hand pre-report estimates released Friday by Informa have both corn & soy estimates well above current USDA projections. Leaving some to question which way the market will move. They estimated corn acres at 96.8 vs. USDA March at 95.9 and soy at 76.0 compared to 73.9 million thus sending the market significantly lower.

With all this being said Private estimates may be forecasting acres higher but what about yield? I know the USDA has thrown out a 166 yield estimate for corn, and that did not change in last Thursday’s report because the USDA rarely has changed their mind in the June report, but I can NO longer play along along with this type of number base on the aforementioned weather. Sorry it is simply too high! They also didn’t change soybean yield either. Not surprising given that data shows that the USDA hasn’t adjusted soybean yields in the June report for over 15 years. What does all this mean for the markets? First the recovering macro markets will give grain a boost. But most importantly, we are currently experiencing a weather market and it will continue to support grains.

Before I go on let me first apologize about the length of this blog post. But I found this info on a blog post on Ag Web and though it was interesting since projected yield is 166. It portrays accurately the difference of where we were at during May, June and July (of 2004 and 2009) the years the corn yield was over 160 bushels per acre. Thank you Kevin Van Trump from Ag Web. Included below are a few of the headlines that Kevin pulled from the “National Climatic Data Center” web site. You will see from the date included there is a drastic difference… Thanks again to the National Climatic Data Center giving us the ability to easily access the information. We start by taking a look at 2004, then move on to 2009 and wrap up with 2012:

May 2004 – May 2004 ranked as the 15th warmest May in the 1895 to present record. The preliminary nationally averaged temperature was 62.8°F (17.1°C), which was 1.7°F (0.9°C) above the long-term mean. May 2004 was above average for precipitation nationally, ranking 24th wettest.

May 2004 – March-May was near average for precipitation, ranking 54th wettest in the last 110 years.

May 2004 – The June 2003-May 2004 (12 month period) precipitation total was near average for June-May, ranking 38th wettest for the last 12 months based on a record of 109 such periods.

June 2004 – June temperatures were near average for the nation as a whole, with cooler than average temperatures in the middle of the nation and in the Northeast.

June 2004 – June 2004 ranked as the 42nd coldest June in the 1895 to present record. The preliminary nationally averaged temperature was 68.8°F (20.4°C), which was 0.5°F (0.3°C) below the long-term mean.

June 2004 – June was much above average for precipitation nationally, ranking 7th wettest. In fact April-June was above average for precipitation, ranking 15th wettest in the last 110 years.

June 2004 – June was record wet for Texas and much wetter than average for 7 other states including Louisiana and Mississippi, which had their 3rd and 2nd wettest Junes on record, respectively.

July 2004 – July temperatures were cooler than average for the nation as a whole, with cooler than average temperatures in the middle of the nation and in the Northeast, while warmer than average conditions prevailed in the West.

July 2004 – July ranked as the 29th coldest July in the 1895 to present record. The preliminary nationally averaged temperature was 73.6°F (23.1°C), which was 0.7°F (0.4°C) below the long-term mean.

July 2004 – was near average for precipitation nationally, ranking 39th wettest.

July 2004 – May-July was much above average for precipitation, ranking 9th wettest in the last 110 years.

July 2004 – Precipitation was above average for August 2003-July 2004, ranking 35th wettest for the last 12 months based on a record of 109 such periods.

July 2004 – Nationally, the contiguous U.S. was wetter than normal due to heavy rains that fell across the southern and central Plains into the Northeast.

*To say the least the May, June, July time period in 2004 seemed to have cooler temps with good rainfall.

MAY-JUNE-JULY 2009 – Final yield the highest ever at 164.7 bushels per acre

May 2009 – This was the 22nd wettest May in the 1895-2009 record. An average of 3.22 inches (82 mm) fell across the contiguous U.S. this month, which is 0.35 inch (9 mm) above average.

May 2009 – The Southeast region experienced its second wettest May in 115-years of record-keeping. For the contiguous United States as a whole, precipitation was above normal. Both Florida (9.86 inches) and Arkansas (10.91 inches) experienced their all-time wettest May. The last time Florida saw a record wet May was in 1976 when 9.15 inches of precipitation fell. Arkansas experienced its last record wet May in 1930 when 10.07 inches of precipitation fell.

May 2009 – spring (March-May) 2009 ended with the contiguous U.S. averaging 52.7°F which is 0.9°F above normal. The contiguous U.S. was also 0.64 inch above normal in terms of precipitation, which was the 24th wettest spring on record. Based on 115 previous spring years, 2009 was Georgia’s second wettest.

May 2009 – While the vast majority of the High Plains Region was dry, western Colorado, and small portions of Kansas, Nebraska, and North Dakota received above normal precipitation.

May 2009 – A wet April followed by a wet May across the central Midwest led to significant planting delays across much of the Midwest. At the beginning of May only Minnesota and Iowa were ahead of schedule, with the remaining states significantly behind. As of May 3rd, only five percent of the corn was planted both in Illinois and Indiana, compared to a five-year average of 66 percent and 47 percent, respectively. Conditions improved and planting increased about the middle of the month, with the biggest surge during the week ending May 24. This was a sunny, dry, and warm week, and corn planting jumped to 62 percent complete in Illinois and 55 percent complete in Indiana. By the end of the month planting was complete in Iowa, and 90 percent to complete in Minnesota, Wisconsin, Ohio, and Missouri. Corn planting was 89 percent complete in Kentucky, 82 percent complete in Illinois, and 78 percent complete in Indiana. Some of the remaining corn acreage may be planted in soybeans due to the lateness of the season. Soybean planting, which typically starts later than corn, was also well behind schedule except in Iowa, Minnesota, Wisconsin, and Ohio.

June 2009 – The frequent and heavy rain in the central Midwest continued to frustrate agricultural interests. At the end of June soybean planting was still behind schedule in Illinois, Indiana, Kentucky, and Missouri. Soybean planting was nearly complete in Iowa.

June 2009 – Saw a return of active weather across the High Plains Region. A large swath of the Region extending through Wyoming, Colorado, and Nebraska received over 200 percent of normal precipitation and many locations ranked in the top 10 wettest Junes on record. Interestingly, according to the National Weather Service in Sioux Falls, SD, there were an unusually high number of days with measurable precipitation at several locations. This June, Sioux Falls, SD and Sioux City, SD both had 16 days with measurable precipitation and Huron, SD had 15 days with measurable precipitation. Each city tied the record for the most number of days with measurable precipitation for June. Crop damage was reported in many locations due to flooding and hail. Wheat was especially hit hard as it was near harvest in many areas and some fields were complete losses. Other crops affected include, but are not limited to, alfalfa, corn, dry beans, and sugar beets.

July 2009 – For the contiguous United States the average July temperature of 73.5°F was 0.8°F below the 20th century average and ranked as the 27th coolest July on record, based on preliminary data.

July 2009 – An abnormally strong and persistent upper-level pattern during the month helped produce a large number of record low temperatures east of the Rockies, while warmth was focused west of the Rockies.

July 2009 – Four of the seven states that make up the Central U.S. (Ohio, Illinois, Indiana, and West Virginia) experienced their coolest ever July in 115 years of records. The region’s three remaining states of Kentucky, Missouri, and Tennessee recorded either their second or third coolest July in history. Pennsylvania also experienced a record cool July, while Wisconsin and Michigan each had its second coolest on record.

July 2009 – This was the 40th wettest July in the 1895—2009 record. Precipitation across the contiguous U.S. averaged 2.90 inches (74 mm), which is 0.14 inch (4 mm) above the 1901-2000 average.

July 2009 – About 19 percent of the contiguous United States had moderate-to-extremely wet conditions at the end of July, according to the Palmer Index (a well-known index that measures both drought and wet spell intensity).

July 2009 – Temperatures were cool across the Midwest in July. Departures ranged from 2°F (1°C) below normal in eastern Ohio to as much as 6°F (3°C) below normal in eastern Iowa. Most of the Midwest remained below normal throughout July with only occasional excursions above normal. For the entire Midwest in July, only one record high temperature was recorded along with 18 record high minimum temperatures. On the other hand, there were more than 400 record low temperatures and more than 1300 record low maximum temperatures during the month. Two periods were particularly cool, July 1-9 and July 17-23. During the former period, 23 record low temperatures and 370 record low maximum temperatures were set or tied. In the latter period, 337 record low temperatures and 942 record low maximum temperatures were set or tied. There was also a drastic reduction in the number of days reaching 90°F (32°C) across the Midwest.

July 2009 – Preliminary numbers show July 2009 as the coolest on record for the Midwest. Illinois, Indiana, and Iowa also recorded the coolest July on record. Michigan, Ohio, Wisconsin, and Kentucky were the second coolest, while Minnesota was the third coolest and Missouri was the fourth coolest.

July 2009 – The cool temperatures combined with timely precipitation in Nebraska to produce one of the best wheat crops on record. According to the USDA the average yield has been 48 bushels an acre which is nearly 10 bushels an acre more than usual. Unfortunately, in other parts of the region, there are some concerns about whether or not crops will reach maturity before freezing in the fall.

July 2009 – The big precipitation story this month comes from Wyoming where, for the first time in nine years, 100% of the state is free of drought or abnormally dry conditions.

July 2009 – With the exception of southern Texas, southeast Mississippi and north central Oklahoma, the bulk of the Southern Region received near or above normal precipitation totals for the month. Much of the Southern Region, however; did accumulate rainfall totals that were well above the monthly expected values. In central Texas, rainfall totals ranged between 200 and 300 percent of normal. Similar values were also observed throughout much of central and eastern Arkansas, northwestern Mississippi, and southwestern Tennessee.

*Once again cooler temps and ample rainfall seemed to be the theme in 2009.

MAY-JUNE 2012 – Yield estimated at 166bpa, the highest yield ever. The problem is I am just NOT seeing the same type of conditions…You be the judge!

May 2012 – The national temperature of 57.1 degrees F during spring was 5.2 degrees F above the long-term average, besting the previous warmest spring of 1910 by 2.0 degrees F. This marked the largest temperature departure from average of any season on record for the contiguous United States. The spring of 2012 was the culmination of the warmest March, third warmest April, and second warmest May. This marks the first time that all three months during the spring season ranked among the ten warmest, since records began in 1895.

May 2012 – Thirty-one states were record warm for the season, and 11 additional states had spring temperatures ranking among their ten warmest. Only Oregon and Washington had spring temperatures near their average.

May 2012 – spring was drier than average for the contiguous U.S. as a whole, with a national precipitation total of 7.47 inches, 0.24 inches below average.

May 2012 – The U.S. Climate Extremes Index (USCEI), an index that tracks the highest and lowest 10 percent of extremes in temperature, precipitation, drought and tropical cyclones across the contiguous U.S., was a record-large 44 percent during the March-May period, over twice the average value. Extremes in warm daytime temperatures (81 percent) and warm nighttime temperatures (72 percent) covered large areas of the nation, contributing to the record high value.

May 2012 – The warmer-than-average conditions, which persisted through winter and spring, limited snowfall over a large portion of the country. According to the Rutgers Global Snow Lab, the spring snow cover extent across the contiguous U.S. was the third smallest on record.

May 2012 – The average temperature for the contiguous U.S. during May was 64.3 degrees F, which is 3.3 degrees F above average — the second warmest May on record.

May 2012 – The June 2011-May 2012 (12 month period) was the warmest 12-month period of any 12 months on record for the contiguous United States. The nationally-averaged temperature of 56.0 degrees F was 3.2 degrees F above the long-term average, surpassing the previous record, set last month (May 2011-April 2012), by 0.4 degrees F. The 12-month period encapsulated the second warmest summer, fourth warmest winter, and the warmest spring on record. Every state across the contiguous U.S. had warmer than average temperatures for the period, except Washington, which was near normal. Every state from the Rockies eastward had a top five warmest June-through-May period, and twenty-six states had their warmest such period on record.

May 2012 – Ongoing drought, combined with windy conditions, created ideal wildfire conditions across the Southwest. According to the U.S. Drought Monitor, as of May 29th, 37.4 percent of the contiguous U.S. was experiencing drought conditions.

May 2012 – According to the National Agricultural Statistics Service, the earliest start to the wheat harvest in Kansas since records began in 1952 has occurred this year. By the end of the month, at least 4 percent of the wheat harvest was complete. The earliest harvest prior to this year occurred in 1962 when 1 percent of the crop had been harvested by June 2nd. The dry, hot, and windy weather in Nebraska led to low soil moisture which caused producers to turn on pivots to aid in crop germination. Although rain was a welcome sight to some, the tornadoes and hail that accompanied the storms led to crop damage which will require producers to replant in some areas of Nebraska. This spring (March, April, and May) was a record breaker across the entire High Plains Region. Average temperatures were above normal at all locations in the Region and the largest temperature departures occurred in the east as areas of South Dakota, Nebraska, and Kansas had average temperatures which were over 8.0 degrees F (4.4 degrees C) above normal.

May 2012 – The big story this month was the development of extreme drought conditions (D3) in northwestern Colorado due to extremely low precipitation. May 2012 was dry for much of the High Plains Region. A large area encompassing southern Wyoming, western and southern Nebraska, northern and western Kansas, and the east and west sides of Colorado had precipitation totals which were less than 50 percent of normal. In addition, many locations within that area received only 25 percent or less of normal precipitation and ranked in the top 10 driest Mays on record. Goodland, Kansas had its 2nd driest May on record with only 0.45 inches (11 mm) of precipitation, which was 13 percent of normal precipitation (period of record 1895-2012). The 1927 record held at 0.31 inches (8 mm). Snowpack in Colorado and Wyoming continued to decline. According to the Natural Resources Conservation Service, by the end of the month, the statewide snowpack was just 5 percent of average in Colorado and 22 percent of average in Wyoming.

May 2012 – Severe Drought in western Kentucky, extreme southern Illinois, and the boot heel of Missouri, but many other areas saw drying of the topsoil, stressed plants, and dry lawns as concerns increased about the potential for drought to rapidly worsen.

May 2012 – The many days of dry conditions in the Midwest allowed farmers to spend more time in the fields, thus corn and soybean planting was running ahead of normal. With much of the crop in the ground by the end of the month, farmers were hoping for adequate rains to replenish soil moisture and supply needed water to stressed plants going into the hot summer months.

June 2012 – Already 150 new nationwide record high-temps recorded and another 132 tied only one week into June.

*Sorry, but as you can see it doesn’t sound anywhere close to what took place in 2004 and or 2009. I apologize for NOT doing my homework earlier and considering the historical weather data. We often get too close to the forest to see the trees and unfortunately get caught up in the day-to-day grind. When you step back though and compare the data it looks like a no-brainer. Either temps need to drastically cool off and the heavens open up with a massive downpour of rain or there is absolutely no way we end up with a 166 bushel per acre yield. I know there will be those that want to argue the latest greatest “triple stack” traits are going to make a huge difference, but I simply cannot buy into that argument any longer considering the evidence presented above. There is simply a huge difference in the early conditions for the years mentioned above. The two highest yielding years were competing for record cool temps and above normal precipitation. This time around we are already setting a record for the all-time hottest spring, the all-time hottest 12-month period, and are well below average in precipitation…Net-net we are completely opposite!

The USDA projected corn balance sheets as unchanged in June, a slight surprise to analysts as they estimated a reduction in supplies due to dry weather in the corn belt. Soybean and wheat supplies were decreased slightly, in line with analysts’ expectations. Today marked the first time the Chicago Board of Trade was open during the WASDE’s 8:30AM CT release time.

Corn

Projected U.S. 2012/13 supplies, production, and use were unchanged this month. 2012/13 ending stocks remained at 1.88 billion bushels. The 2011/12 and 2012/13 projected range for season-average corn prices was unchanged and remain $5.95 to $6.25 and $4.20 to $5.00, respectively.

U.S. corn usage to produce ethanol in 2011/12 was projected 50 million bushels higher, reflecting recent ethanol trade and production data. Corn exports were projected to decline by 50 million bushels as sales and shipments fell below previous estimates. 2011/12 U.S. corn ending stocks remained at 851 million bushels.

Global coarse grain supplies in 2012/13 were estimated to increase 4.8 million tons due to increases in corn production and beginning stocks. 2012/13 global corn beginning stocks were increased by 1.6 million tons on higher production from Brazil and China in 2011/12.

The USDA’s unchanged balance sheet for corn came as a surprise to analysts who predicted a decrease in supplies. Keep a close eye on the weather patterns in the Corn Belt as continuing drought will have an adverse effect on production and supply.

Soybeans

2011/12 U.S. soybean exports were increased this month by 20 million bushels due to increased global import demand. U.S. ending stocks for 2011/12 were estimated to decrease 35 million bushels to 175 million bushels.

U.S. soybean ending stocks for 2012/13 were projected at 140 million bushels, a five million bushel decrease from last month. Exports for 2012/13 were estimated 20 million bushels lower to 1.485 billion bushels due to decreased supplies. The 2012/13 average soybean price was unchanged at $12.00 to $14.00 per bushel.

Looking forward to the acreage report that will be released later this month I believe more soybeans will be planted due to the timely increases in soybean price and lack of available corn seed for re-planting.

Wheat

U.S. wheat beginning stocks for 2012/13 were adjusted down by 40 million bushels due to increases in food usage and exports. The increased food usage reflects the North American Miller’s Association’s higher than expected flour milling during the January to March quarter.
U.S. wheat production for 2012/13 is estimated down 11 million bushels to 2.234 billion bushels based on lower production for winter wheat and dorum wheat. 2012/13 ending stocks were projected to decrease by 41 million bushels. The season average wheat price for 2012/13 was projected at $5.60 to $6.80 per bushel.

Global wheat supplies for 2012/13 were decreased by seven million tons. Global production for 2012/13 was lowered as there were reduced crop prospects for several exporting countries including Russia, U.S., EU-27 and Turkey.

Outlook

The poor conditions of the U.S. corn crop reflected in the latest crop progress report were not taken into consideration in this report and we now expect major revisions in next month’s WASDE. The next major USDA report will be the quarterly acreage and grain stocks reports released at the end of the June.

Weather continues to be a main theme in the grain markets, as well as the global economy.

High hopes and prayers for rain this week were answered for some farmers, but not for others. This week’s Drought Monitor Index shows that out of the 18 major corn-growing states, only a few aren’t suffering from abnormally dry or drought conditions.

Isolated showers fell on parts of the Plains, but May will still go down as a very dry month across large sections of the central and southern Plains, according to USDA’s Joint Ag Weather Facility. Many of the area’s summer crops and maturing winter wheat are under increasing levels of stress.

In the Corn Belt, cool weather prevailed at the end of the week, in the wake of a departing cold front. A few showers lingered across the eastern Corn Belt, where recent rains have benefited corn, soybeans, and winter wheat, but have not completely eradicated short-term dryness

Looking forward, the National Weather Services is predicting warmer- and drier-than-normal weather across the majority of the U.S. for June 6-10. Several weather experts have come out and said they are really concerned about the crop this summer, says Jerry Gulke, president of the Gulke Group. “After the limited rainfall that came through this week, there’s not much rain in the forecast for the next 10 days.” With a lack of rain and declining crop condition ratings, Gulke says you would expect that markets would surge in light of a reduced supply. But, that wasn’t the case this week.

July 2012 corn closed at $5.56 on Friday, nearly a dime off the high, and September 2012 corn dropped to $5.16. Soybeans didn’t finish the week much better, with July beans up a few cents and September beans falling to $12.84.

Gulke says it’s like the market doesn’t care needed rain may not fall. “It’s saying ‘Jerry I don’t care what type of crop you’re going to get. The demand won’t be there to eat whatever you produce.’ That’s really a scary situation.”

Global Concerns Heighten

In addition to weather scares, Gulke says the markets are also volatile due to the global economy.

“The European situation is getting worse, and that could spread to the United States and China.”

He says during the last few months, a systemic change in the outlook of attitudes about agriculture has taken place. The lure of high commodity prices has seduced a lot of farmers, in the U.S. and around the globe, to increase acreage.

Ideally, Gulke says, we could hold global demand stable. “But, if global demand would begin to shrink, in an atmosphere of us producing more acres around the world that would be a recipe for disaster. We are beginning to see this unfold.”